Northrop Grumman to Buy Litton for $5.1 Billion

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Defense contractor

Northrop Grumman

(NOC) - Get Report

said Thursday it would acquire

Litton Industries

(LIT) - Get Report

for $5.1 billion in cash, including the assumption of $1.3 billion in debt.

Trading in shares of both companies was halted after hours on the announcement. Northrop shares closed down 19 cents, or 0.2%, to $81.94 in regular-hours

New York Stock Exchange

trading, while Litton shares were up 94 cents, or 1.5%, to $62.63.

Los Angeles-based Northrop will pay $80 a common share and $35 per Series B preferred share to make Woodhills, Calif.-based Litton a wholly owned subsidiary. The common-stock offer price for Litton represents a 27.7% premium above Thursday's close.

Northrop said the deal, which has been unanimously approved by both companies' boards, will be neutral to earnings in 2001, but add double-digit gains to earnings in 2002 and beyond. Analysts on average are expecting 2001 earnings of $8.93 a share and 2000 earnings per $8.80 a share for Northrop, according to

First Call/Thomson Financial

.

Combined, the companies say they expect savings of at least $250 million in cost savings over the next few years, including $100 million in savings in the first year following the completion of the transaction. Northrop also projected combined pro forma revenues of more than $15 billion in 2001, growing to $18 billion by 2003.

The deal, which the company expects to close in the first quarter of 2001, is subject to regulatory approval. Dr. Ronald Sugar, 52, currently Litton's president and chief operating officer, will become a Northrop vice president, as well as president and chief executive officer of the new Litton subsidiary. Northrop said Michael Brown, CEO of Litton, plans to retire.